"Although oil and natural gas companies are experiencing record profits, existing tax policy provides these same companies with billions of dollars in unnecessary and unwarranted subsidies and tax incentives," said Senators Collins and Reed.
Senator Collins has been fighting to ensure LIHEAP assistance is funded at an adequate level. She has pointed out that the recent hurricanes have caused heating oil and gasoline prices to soar, which will force many families in Maine and throughout the nation to choose between turning off their heat or putting food on their tables.
"At a time when huge oil corporations are posting record profits, low-income families should not be forced to choose between putting food on the table and putting heating oil in the tank," said Senator Collins.
Each year, 4.5 million low-income families, including about 46,450 households in Maine, rely on LIHEAP to assist with the costs of heating their homes. LIHEAP is a federal block grant program that provides states with annual funding to operate home energy assistance programs for low-income households. In addition to helping to pay energy bills for low-income families and the elderly, LIHEAP helps to fund energy crisis intervention programs, low-cost residential weatherization and other energy-related home repairs.
Following is the text of the letter to the Senate Finance Committee:
Dear Chairman Grassley and Ranking Member Baucus:
We are writing to urge you to consider including revenue measures to finance $2.92 billion for the Low-Income Home Energy Assistance Program (LIHEAP) in the tax reconciliation bill that the Committee is considering. While there are a number of potential measures to raise revenue for this increased spending, we believe two have particular merit: a tax on crude oil windfall profits and repeal of unnecessary oil and natural gas tax incentives. We would like to work with you to explore these options. Oil companies reported record profits for the third quarter on surging prices: Chevron posted profits of $3.6 billion; BP profits rose to $6.5 billion; Royal Dutch Shell profits grew to $9 billion; and ExxonMobil profits gushed to nearly $10 billion. According to Business Week, ExxonMobil earned $150 million for every working day in the past three months. In light of these profits, we do not believe the oil industry needs taxpayer subsidies originally designed to shore up a struggling industry at a time when oil prices were closer to $10 per barrel than to $60 per barrel. While this year has been exceptionally lucrative for the oil industry, rising energy prices threaten to financially overwhelm low-income families and seniors this winter. Americans are experiencing extraordinarily high run-ups in energy prices that jeopardize the ability of many families to stay warm this winter.
In 1980, Congress established the LIHEAP program as part of the Crude Oil Windfall Profit Tax Act. Twenty-five years later, with energy prices overwhelming workers' salaries and seniors' Social Security checks, it is appropriate to again tax windfall profits to aid in energy assistance. We believe a temporary, one-year windfall profit tax on integrated oil companies is a small price to pay to provide Americans with energy security this winter. The cost of a windfall profit tax to integrated oil companies is small. For the companies listed above, this additional funding would amount to approximately 10 percent of profits from a single quarter, or in the case of ExxonMobil alone, just one-third of the Company''s third-quarter profits.
Although oil and natural gas companies are experiencing record profits, existing tax policy provides these same companies with billions of dollars in unnecessary and unwarranted subsidies and tax incentives. For example, a provision allowing the oil and gas industry to expense intangible drilling costs is predicted to cost the Federal Government $2.3 billion over five years. According to the Congressional Research Service, this provision provides a subsidy to the oil and gas industry that is not available to other industries, is "economically inefficient," and "promotes investment decisions that are based on tax considerations rather than inherent economic considerations." With net profits of a single oil company reaching nearly $10 billion in a single quarter, it is absurd to think that federal taxpayers are actually subsidizing capital costs for the oil industry.
The $2.92 billion we are seeking is in addition to the funding provided in the fiscal year 2006 Labor, Health and Human Services, Education, and Related Agencies appropriations bill, and would bring total LIHEAP funding to $5.1 billion, the amount authorized in the Energy Policy Act of 2005. With this funding, LIHEAP could serve 12 million families this year. This is double the number of families served last year, but still only one-third of those eligible. States could also increase the level of benefits to help with rising costs. For seniors, this funding would mean they would not have to choose between buying life-saving medication and paying their natural gas bill. For working families, this funding would mean they do not have to decide between putting food on the table and putting heating oil in the tank.
We hope the Finance Committee will support this effort to increase LIHEAP funding this winter, and would welcome the opportunity to work with you on this matter.
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